India’s defence stocks have made a dramatic comeback. Down through most of 2024, the sector has now scaled a historic market capitalisation high of Rs 11.23 lakh crore. A combination of investor hopes, rising geopolitical tensions, and robust policy support has driven the rally.
The Nifty India Defence Index has rallied handsomely since its February 2025 low, recording more than 50 per cent gains. The fresh market cap crosses the last July 2024 high of Rs 10.09 lakh crore, registering a sharp change of investor sentiment.
Sharp Correction Followed by Strong Rally
The defense industry went through a challenging phase during the previous year. Between July 2024 and February 2025, the Nifty India Defence Index slid 33 per cent. Sentiment was subdued as investors awaited new signals. That changed rapidly this year. In March, the index rose 24.6 per cent. It gained 11.5 per cent in April too, and has already risen 9 per cent through May thus far.
This consistent increase has taken the index far above its previous highs. It is now almost 62 per cent above its February low of Rs 6.95 lakh crore. This upswing is an indication of increased faith in India’s defence sector’s long-term growth.
Policy and Global Factors Drive Interest
Government emphasis on indigenous defence production remains the driving force for investor attention. Policies such as import curbs, Make in India initiatives, and defense budget hikes provide support to this trend.
Meanwhile, events abroad and increasing border tensions have led investors to move into defence assets, viewed as safer options at times of uncertainty.
Rally Remains Narrow for Now
Nevertheless, the overall trend is encouraging. With defence capital expenditure on the up and policy supportive, the defence sector in India can perhaps enjoy sustained inflows. The rebound after February is more than a bounce — it heralds a new cycle for the long-underperforming sector.
